Monday’s announcement that Rocket CEO and Vice Chairman Jay Farner will retire, effective June 1, was sudden and unexpected.
As the CEO of a dominant company in the mortgage industry and one who was exuberant about sharing his vision for the future of Rocket just a few months ago in an interview with Mortgage Banker Magazine, Farner said he has decided to exit the company altogether.
The decision has some analysts scratching their heads in confusion.
“The change in leadership at Rocket comes as a surprise given Jay Farner has been the ‘face’ of RKT as a public company since the IPO in 2020,” Piper Sandler Managing Director Kevin Barker and Research Analyst Brad Capuzzi said in a joint statement.
Farner’s decision to spend more time with his family seems perfectly reasonable, but it raises a host of questions. For one, why, at 50 years old and after 27 years at the company, also step down from the board of directors and have no more involvement with the company he helped build? As Rocket Cos. founder and Chairman Dan Gilbert noted in announcing Farner’s decision, “Jay has overseen the most rapid period of growth and profitability in our 37-year history.”
Also, why leave Rocket in the midst of a tough year for the housing market, especially since their fierce rival, United Wholesale Mortgage (UWM), delivers some hard hits with their price war and overtaking Rocket in the third quarter of last year as the top overall mortgage originator in the United States.
Barker and McCanless believe Rocket’s fourth-quarter earnings report may offer clues as to whether Farner’s decision had anything to do with the company’s performance. Rocket has yet to establish a release date for its earnings report.
“A change at the CEO level prior to a pending earnings announcement presents some consternation,” Barker and Capuzzi stated. “Particularly within a very challenging mortgage origination market and taking into account Mr. Farner bought 5 milion+ shares of stock over the past year.”
Rocket has had quite the shake-up in leadership over the past year, including the retirements of Chief Financial Officer Julie Booth’s and General Counsel Angelo Vitale, both of whom had been with the company for more than 20 years.
Others have been promoted, including Austin Niemiec to chief revenue officer; Tim Birkmeier to president of Rocket Mortgage; and Mike Fawaz to the new role as head of Rocket Pro TPO.
“With Julie Booth retiring back in November of ‘22, and now [Farner] leaving, you know, less than three months after her departure, certainly brings up some questions,” said Wedbush analyst Jay McCanless.
McCanless was first informed of the news by Rocket’s Investor Relations team, who said it was Farner’s choice to retire and that his temporary replacement, Bill Emerson, has been a long-term employee of the company and worked closely with Farner, proving he is seasoned enough to take on this responsibility.
Rocket, however, is looking for external and internal candidates to permanently replace Farner as CEO. In a particularly tough year for the housing market, it may not be the wisest decision to hire an outsider with no history with the company. McCanless said replacing the CEO with an internal candidate makes for a more seamless transition.
“Depending on which forecast you listen to, it's gonna be a rough year,” McCanless said. “If you have a good bench to rely on, it usually is a pretty seamless transition. Dan Gilbert is still chairman of the board and active with the company. You've got some key players still in place while they find Jay's replacement. So yeah, I'm not worried about any kind of drop off in the company's activity level.”
Barker and Capuzzi agreed, stating, “Considering RKT's unique culture developed over several decades by Dan Gilbert, we would expect the company to primarily focus on internal candidates that embody the company's culture as likely successors to Mr. Farner.”
In all, Rocket’s main business — mortgage lending — is under intense pressure from rising interest rates. Everyone in the industry will have an eye on them, as their next move may be the most important yet.
